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EigenLayer is unlocking Ethereum’s security for all dApps on the network. Imagine a blockchain where any project—regardless of size—can tap into the same security that Ethereum enjoys.
EigenLayer is a decentralized protocol that extends Ethereum’s cryptoeconomic security to other applications and protocols within the ecosystem. But what exactly does this mean, and how does EigenLayer make it possible?
This guide will help you understand what EigenLayer is building and how it’s changing the Ethereum ecosystem.
First, let’s start with a breakdown of “cryptoeconomic security.” It sounds technical, but it is critical to understanding why EigenLayer is necessary.
Cryptoeconomic security is simply the use of economic incentives (backed by cryptography, of course) to ensure that participants in a blockchain network act honestly and maintain the integrity of the blockchain.
At its core, it creates a system where the cost of cheating or attacking the network outweighs any potential reward, while honest participants are rewarded.
The cryptoeconomic security model on Ethereum requires validators to stake ETH as a security deposit, which they lose if they act maliciously (i.e., their stakes are slashed). However, this security is restricted to only the Ethereum blockchain and does not extend to applications built on the network.
The challenge is that while Ethereum itself is secure and decentralized, infrastructure projects on the blockchain, like bridges or off-chain components such as co-processors and policy enforcers, must establish their own security.
Here are some issues both developers and stakers face with the model:
This system is inefficient and leads to value leakage in the Ethereum ecosystem. The EigenLayer model solves these problems by introducing two novel ideas — restaking and free-market governance.
Think of EigenLayer as a decentralized marketplace that connects stakers with protocols or services, AVSs (Actively Validated Services), that seek security. As outlined in its whitepaper, the EigenLayer is:
“A set of smart contracts on Ethereum that allows consensus layer Ether (ETH) stakers to opt into validating new software modules built on top of the Ethereum ecosystem.”
The result is a permissionless and free-market governance market where any decentralized services can tap into the pooled security of Ethereum to secure their application. Stakers can offer economic security through their staked ETH or by staking any token.
In return, stakers can earn more rewards by restaking their staked ETH to secure these protocols and applications.
Restaking lets ETH stakers use their staked ETH to secure additional applications on Ethereum, extending their economic security to these applications.
Restakers do this by granting the EigenLayer smart contract the ability to impose additional slashing conditions for their staked ETH. As a result, this extends their cryptoeconomic security to the new protocols they are securing.
Think of it as putting their ETH to work twice — once to support Ethereum and then again to help secure additional projects built on top of Ethereum.
This creates a mutually beneficial system: restakers earn rewards, while AVSs gain access to Ethereum’s security infrastructure without building their own from scratch.
Restaking provides a way to improve the security of services built on Ethereum and reduce value leakage with the burden of the capital cost required to bootstrap individual economic security.
Explore the Restaking ecosystem on Ethereum on our dashboard: Restaking.info
Actively Validated Services refer to protocols and infrastructure services that receive security from restaking through EigenLayer. Essentially, these are the applications or networks tapping into Ethereum’s security, benefiting from the work of Ethereum validators who restake their ETH.
EigenLayer offers AVSs an open marketplace to “rent” cryptoeconomic security from Ethereum validators. For validators, this involves restaking their ETH by allowing the EigenLayer smart contract to impose additional slashing conditions to secure the AVSs they choose. The process is straightforward:
If a validator behaves maliciously, their staked ETH will be slashed, along with the rewards they earn from Ethereum consensus.
Restaking ETH to secure AVSs is not without its risks. Cryptoeconomic security revolves around creating a system that effectively rewards protocol-consistent (good) behaviors and punishes malicious behaviors (faults).
However, not all malicious behavior (faults) can be addressed directly through smart contracts. The problem lies in handling what are called intersubjective faults.
To understand this problem better, you need to know that malicious behaviors (faults) associated with performing digital tasks are broadly divided into:
Objectively attributable faults are purely mathematical or cryptographic, so they can be punished without asking for the opinions of others, e.g., double signing or submitting invalid rollups. Objective faults are easily resolved; they can be punished by slashing through smart-contract implementation.
On the other hand, intersubjectively attributable faults are errors or disputes that are not easily provable or agreed upon by everyone in the network. Unlike objective faults, which can be handled by slashing through smart contracts, intersubjective faults often require human judgment or coordination to resolve. This is because, in most cases, it is not clear from inside the EVM if a fault has been committed but the fault is clear to observers. So, they are usually resolved with social consensus.
An example of an intersubjective fault is a disagreement between different oracles about the price of ETH at a given time. Let’s say a dApp relies on multiple oracles to provide on-chain price feeds for ETH. If the oracles provide conflicting prices, for example, $1800, $1750, and $1650, there is a disagreement about ETH’s true price.
This disagreement isn’t something the protocol can resolve automatically, as the fault arises not from a technical error in the blockchain but from differing interpretations of external data. At this point, human input is typically needed to determine which price feed is most accurate or reliable.
EigenLayer solves the insubjective problem by introducing the EIGEN token.
The EIGEN token is described as a “universal intersubjective work token.” What does that mean? Let us break it down:
EIGEN is designed to complement the role of ETH restaking on EigenLayer. Staking EIGEN offers a way to handle intersubjective faults without needing Ethereum social consensus.
Learn more about EigenLayer and EIGEN Token:
The EIGEN token uses a process called intersubjective forking to handle intersubjective faults. This system allows the network to punish malicious behavior without affecting the underlying restaked ETH.
Instead, AVSs are expected to stake EIGEN tokens higher than the cost incurred in case of malicious acts to act as the security against insubjective faults.
If an intersubjective fault occurs, users or AVSs can raise a challenge to initiate the slashing of the malicious actor’s EIGEN stake. The challenger creates a fork of the token, where the malicious staker’s allocation is removed. Users can then choose between the original and forked versions.
If a majority of users agree that the staker acted maliciously, the forked version becomes the canonical version of the token. But any forks can affect all token holders and can potentially cause disruption for long-term holders.
To avoid this, EigenLayer employs a dual-token model to ensure a clear separation between its DeFi activities and staking or operation use case, maintaining stability for users across these different use cases.
EIGEN is split into two parts — EIGEN and bEIGEN. bEIGEN is the staking token, used for handling disputes and maintaining security within EigenLayer. It is essential for operators and is capable of forking, which is necessary to address intersubjective faults.
On the other hand, EIGEN is designed to remain unaffected by any forks occurring in bEIGEN, keeping it stable and reliable for DeFi and other non-staking applications.
By isolating bEIGEN’s staking functions from EIGEN’s DeFi role, EigenLayer ensures that each token serves its specific purpose without unwanted interference.
ETH restaking offers a way to aggregate ETH security across other services within the Ethereum ecosystem and increase the security of dApps built on this service.
The idea is simple — reduce the inefficiency and burden of capital cost that comes with each protocol bootstrapping their cryptoeconomic security. However, ETH restaking is limited in addressing intersubjective faults. That’s where EIGEN staking comes in.
The purpose of EIGEN staking is to “secure AVSs that have any intersubjectively attributable faults and penalize the EIGEN (bEIGEN) stake of the operators who participate in these faults.”
This makes it possible for EigenLayer to offer security for a wide range of infrastructure services like oracle, prediction markets, and storage services, which might not be possible with just ETH restaking.
Ultimately, the goal is to build a comprehensive cryptoeconomic security model that can effectively secure the infrastructure services and dApps that rely on EigenLayer.
EigenLayer allows protocols to tap into Ethereum’s security by leveraging the existing Ethereum validators through a process called restaking.
Restaking allows Ethereum validators to use their already-staked ETH to secure other protocols within the EigenLayer ecosystem. Validators grant the EigenLayer smart contract permission to impose additional slashing conditions on their staked ETH, which provides security to new services.
Intersubjective faults are malicious actions that cannot be easily proven or resolved by smart contracts, often requiring human judgment or coordination. EigenLayer handles these by using the EIGEN token and a process called “intersubjective forking” to challenge and penalize malicious actors.
Token forking is a process used to resolve disputes over intersubjective faults. If a challenge is raised, a fork is created where the malicious actor’s tokens are excluded. Users and AVSs can then choose which version of the token to support, and the consensus-driven fork becomes the new version.
You can join EigenLayer as a validator by restaking your ETH and selecting which AVSs to secure. AVSs can integrate with EigenLayer to leverage Ethereum’s cryptoeconomic security, avoiding the need to bootstrap their own.
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